Bangladesh’s state-owned commercial banks have the capacity to expand lending but continue to lag in timely loan recovery, said central bank Governor Ahsan H Mansur on Monday, underscoring a key structural weakness in the country’s banking system.
Speaking at Sonali Bank’s Annual Conference 2026 in Dhaka, Dr Mansur said weak borrower selection remains a major factor behind rising defaults, adding that improving credit appraisal is essential to keeping loans from turning non-performing.
Years of tight regulatory controls have made state banks excessively cautious, constraining credit growth and limiting their contribution to the broader economy, the Governor said.
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While such caution was once necessary, he pointed out, an excessively restrictive lending model, similar to that seen before 2000, is incompatible with the needs of a modern economy.
“If a bank mobilises deposits but fails to play an effective role in the macroeconomy, its success remains limited,” Mansur said, urging Sonali Bank to move beyond its conservative approach and expand lending more assertively.
He pointed to a wide gap between Bangladesh’s banking sector and global peers, particularly in consumer and housing finance, where state-owned banks have so far played only a marginal role despite strong market potential.
Dr Mansur called on Sonali Bank to transform itself into a ‘full-fledged commercial bank’ operating strictly on commercial principles, a shift he said is necessary to ensure long-term profitability.
On the bank’s financial position, the Governor highlighted several positive developments.
Profits earned last year will be used to cover capital and provisioning shortfalls, he said, expressing confidence that Sonali Bank could eventually resume dividend payments.
The bank’s non-performing loan ratio has already fallen below 18%, according to Mansur, who said the figure could decline further if the bank increases high-quality lending.
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He also said the government plans to give Sonali Bank greater operational autonomy, allowing it to function on commercial considerations, and a policy direction, he hopes, future governments will maintain.
Dr Mansur urged Sonali Bank to step up efforts to attract remittances, strengthen support for exporters and identify capable small and medium-sized enterprise borrowers at the grassroots level, saying these areas will be critical to both the bank’s performance and the country’s economic growth.